East Properties(EGP) - 2025 Q2 - Quarterly Results

Overview and Highlights EastGroup Properties reported strong Q2 2025 results, driven by FFO and NOI growth, maintaining a positive long-term outlook CEO Commentary and Quarter Highlights EastGroup Properties reported strong Q2 2025 results, with significant FFO and NOI growth, driven by robust rental rate increases - The CEO highlighted the company's resilience in the face of economic uncertainty, emphasizing a strong balance sheet and a diversified portfolio as key strengths for navigating market challenges. The long-term outlook is considered bullish due to favorable secular trends in the industrial real estate sector[3] Q2 2025 Key Performance Indicators | Metric | Q2 2025 Result | | :--- | :--- | | Diluted EPS | $1.20 (vs. $1.14 in Q2 2024) | | FFO per Share (Excluding items) | $2.21 (vs. $2.05 in Q2 2024, an increase of 7.8%) | | Same Property NOI Growth (Straight-Line) | +6.6% YoY | | Operating Portfolio Leased | 97.1% as of June 30, 2025 | | Rental Rate Increase (New/Renewal) | +44.4% on a straight-line basis | | Development Starts | 2 projects totaling 469,000 sq. ft. | | Acquisitions (Subsequent to quarter-end) | 2 properties in Raleigh for ~$61 million | Financial Performance The company demonstrated robust financial performance in Q2 2025, marked by increased EPS, strong FFO, PNOI, and rental rate growth Earnings Per Share (EPS) Q2 2025 diluted EPS increased to $1.20, driven by higher PNOI and lower interest expense, despite a slight H1 decrease EPS Performance: Three Months Ended June 30 | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Diluted EPS | $1.20 | $1.14 | | PNOI per Share | $2.46 | $2.35 | | Interest Expense per Share | ($0.15) | ($0.20) | | Depreciation & Amortization per Share | ($1.01) | ($0.94) | EPS Performance: Six Months Ended June 30 | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Diluted EPS | $2.35 | $2.37 | | PNOI per Share | $4.88 | $4.68 | | Interest Expense per Share | ($0.30) | ($0.41) | | Gains on Sales per Share | $0.00 | $0.18 | Funds from Operations (FFO) and Property Net Operating Income (PNOI) Strong Q2 2025 FFO per share grew 7.8%, fueled by 13.5% PNOI increase and 44.4% rental rate growth FFO & PNOI Growth: Three Months Ended June 30, 2025 | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | FFO per Share (Excl. items) | $2.21 | $2.05 | +7.8% | | Total PNOI | $129.2 million | $113.8 million | +13.5% | | Same PNOI Growth (Straight-Line) | N/A | N/A | +6.6% | | Same PNOI Growth (Cash Basis) | N/A | N/A | +6.4% | FFO & PNOI Growth: Six Months Ended June 30, 2025 | Metric | H1 2025 | H1 2024 | % Change | | :--- | :--- | :--- | :--- | | FFO per Share (Excl. items) | $4.33 | $4.03 | +7.4% | | Total PNOI | $255.4 million | $225.1 million | +13.4% | | Same PNOI Growth (Straight-Line) | N/A | N/A | +5.9% | | Same PNOI Growth (Cash Basis) | N/A | N/A | +5.8% | - Rental rates on new and renewal leases increased significantly, rising by an average of 44.4% in Q2 2025 and 45.8% for the first six months of 2025, indicating strong demand and pricing power[9][14] Portfolio Activity EastGroup actively expanded its portfolio through strategic acquisitions and a robust development program, adding new projects and transferring completed ones Acquisitions EastGroup actively acquired development land and fully leased properties in key growth markets, expanding its footprint and future pipeline - During Q2 2025, the company acquired significant land parcels for future development: - Tampa, FL: 65.9 acres for a planned 550,000 sq. ft. logistics center for ~$32.4 million[17] - Dallas, TX: 28.6 acres for a planned 350,000 sq. ft. development for ~$17.8 million[18] - Subsequent to June 30, 2025, EastGroup expanded its presence in the Raleigh-Durham market by acquiring two 100% leased industrial buildings totaling 318,000 sq. ft. for approximately $61.4 million[19] - The company also acquired 37 acres of development land in Orlando for $8.5 million and is under contract to purchase another 40 acres in Dallas for $25 million, further bolstering its future development pipeline[20][21] Development and Value-Add Properties The company's robust development program started two new projects, transferred four to operations, and maintained a large active pipeline - In Q2 2025, EastGroup started construction on two new development projects in Atlanta and Nashville, totaling 469,000 square feet with projected costs of $69.9 million[22] - As of June 30, 2025, the company's development and value-add program comprised 18 projects, totaling 3,714,000 square feet. These projects were 16% leased with a total projected cost of $531.4 million[23] - During Q2 2025, four projects totaling 785,000 square feet in Orlando, Tampa, Fort Worth, and San Antonio were transferred to the operating portfolio. For the first six months of 2025, a total of 1,160,000 square feet were transferred[24] Capital Allocation and Financial Position The company maintained a strong balance sheet with low leverage, declared consistent dividends, and enhanced financial flexibility Dividends EastGroup declared a Q2 2025 dividend of $1.40 per share, continuing its 32-year streak of maintaining or increasing distributions - The company declared a Q2 2025 dividend of $1.40 per share, its 182nd consecutive quarterly cash distribution[25] - EastGroup has a 32-year history of maintaining or increasing its dividend, with increases in each of the last 13 years[25] Financial Strength and Flexibility The company maintained a strong balance sheet with low leverage (14.2% debt-to-market cap) and high coverage ratios Key Financial Ratios (as of Q2 2025) | Metric | Value | | :--- | :--- | | Debt-to-Total Market Capitalization | 14.2% | | Interest and Fixed Charge Coverage Ratio | 16.1x | | Debt to EBITDAre Ratio | 2.9x | - During Q2 2025, the company settled forward equity sale agreements, issuing 416,067 shares for net proceeds of approximately $74.1 million[28] - Subsequent to quarter-end, an additional 647,758 shares were issued from settled forward equity agreements, raising approximately $117.1 million in net proceeds[28] Outlook for 2025 EastGroup updated its full-year 2025 guidance, raising FFO per share forecasts to $8.89-$9.03, reflecting continued growth 2025 Guidance EastGroup updated its full-year 2025 guidance, raising FFO per share forecasts to $8.89-$9.03, reflecting continued growth Full Year 2025 Guidance | Metric (per diluted share) | Low Range | High Range | | :--- | :--- | :--- | | Net Income (EPS) | $4.76 | $4.90 | | Funds from Operations (FFO) | $8.89 | $9.03 | Revised 2025 Midpoint Guidance Assumptions | Metric | Revised 2025 Guidance | April 2025 Guidance | | :--- | :--- | :--- | | FFO per share | $8.96 | $8.94 | | FFO per share growth (YoY) | 7.3% | 7.1% | | Same PNOI growth (cash basis) | 6.5% | 6.3% | | Average month-end occupancy | 96.0% | 96.1% | | Development starts | $215 million | $250 million | | Operating property acquisitions | $160 million | $150 million | Appendix This section provides essential unaudited financial statements and detailed reconciliations of GAAP to non-GAAP measures for performance evaluation Financial Statements and Non-GAAP Reconciliations This section includes unaudited financial statements and detailed reconciliations of GAAP to non-GAAP measures like FFO and PNOI Consolidated Statements of Income (In Thousands) | Line Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Total Revenues | $177,286 | $351,735 | | Total Expenses | $106,836 | $214,333 | | Net Income | $63,313 | $122,750 | | Net Income Attributable to Common Stockholders | $63,299 | $122,722 | FFO Reconciliation (In Thousands) | Line Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net Income Attributable to Common Stockholders | $63,299 | $122,722 | | Depreciation and Amortization | $53,012 | $105,532 | | FFO Attributable to Common Stockholders | $116,341 | $228,314 | PNOI Reconciliation (In Thousands) | Line Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net Income | $63,313 | $122,750 | | Adjustments (Depreciation, Interest, G&A, etc.) | $65,871 | $132,612 | | Property Net Operating Income (PNOI) | $129,184 | $255,362 | Definitions of Non-GAAP Measures This section defines key non-GAAP financial measures like FFO, PNOI, and EBITDAre, explaining their calculation and purpose - Funds from Operations (FFO): Calculated per Nareit standards, it starts with GAAP net income and excludes gains/losses from property sales and real estate depreciation. It is a primary measure of a REIT's operating performance[35] - Property Net Operating Income (PNOI): Defined as income from real estate operations less operating expenses. It is used to evaluate the performance of the company's property portfolio at the property level, separate from corporate-level expenses[37] - EBITDA for Real Estate (EBITDAre): Computed per Nareit standards, it adjusts Net Income for interest, taxes, depreciation, amortization, and gains/losses on property sales. It is used to measure operating performance and the ability to service debt[39]